Here are business news highlights for Tuesday, Nov. 5, 2013.
As US economy plods and pay lags, companies profit
WASHINGTON (AP) - Look at the U.S. economy and you'll notice an unusual disconnect. The economy is being slowed by a tight job market, scant pay raises and weak business investment. Yet corporate profits are reaching record highs and fueling record stock prices.
What gives?
For starters, weak job growth has held down pay. Since the recession struck six years ago, businesses have been relentless in cutting costs. They've also stockpiled cash rather than build new products or lines of business. And they've been earning larger chunks of their profits overseas.
All of which is a recipe for solid profits and tepid economic growth.
The economy grew at a meager annual rate of just 1.8 percent in the first half of 2013. The unemployment rate is 7.2 percent, far above the 5 percent to 6 percent considered healthy. Even so, corporate profits equaled 12.5 percent of the economy in the April-June quarter, just below a 60-year high reached two years ago. Profits of companies in the Standard & Poor's 500 have nearly doubled since June 2009. Earnings appear to have risen again in the July-September quarter.
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Twitter just one symptom of IPO fever's return
IPO fever is back.
Five years after the financial crisis dampened enthusiasm for initial public offerings, investors are again eager to buy shares when companies start trading. Twitter is the star this week, but the number of offerings shows that it's not just social-media darlings that are seeking and attracting investors.
There have been 190 offerings this year, and momentum has built as market indexes have set new highs. A more active IPO market signals investor confidence in the economy. And the cash that companies raise in an IPO can help them invest and hire more, potentially supporting economic growth
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Hedge fund giant SAC Capital to pay $1.8B penalty
NEW YORK (AP) - A federal prosecutor says the federal government has effectively shut down a hedge fund giant with a deal requiring it to plead guilty to criminal fraud charges and pay a record $1.8 billion, proving that no financial institution is "too big to jail."
U.S. Attorney Preet Bharara announced the deal with SAC Capital Advisors and related companies on Monday, saying it must be approved by federal judges in Manhattan before the largest fine in history for insider trading offenses takes effect. A plea hearing in the case was set for Friday.
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What is Google building out in San Francisco Bay?
SAN FRANCISCO (AP) - San Francisco's mayor says he doesn't know what it is. Police say it's not their jurisdiction. And government inspectors are sworn to secrecy.
Google is erecting a four-story structure in the heart of the San Francisco Bay but is managing to conceal its purpose by constructing it on docked barges instead of on land, where city building permits and public plans are mandatory. The Internet giant's actions appear legal. But the mystery surrounding the bulky floating building - and a similar one off Portland, Maine - is generating rumors and worries.
Privacy experts, environmentalists and legal authorities say that whether it is a store, a data storage center or something else, the secrecy may backfire because Silicon Valley residents are highly protective of one of the most scenic and environmentally sensitive bays in the U.S.
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Endo Health buying Paladin Labs for about $1.5B
MALVERN, Pa. (AP) - Endo Health will spend about $1.5 billion to buy Canadian specialty drug maker Paladin Labs, and both will then be folded into a newly-formed Irish holding company.
Endo wants to accelerate its expansion at home and abroad and the acquisition of Paladin is expected to immediately boost profit in 2014. Cost savings related to the acquisition are expected to total at least $75 million a year, according to the company.
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US home prices rise at slower pace in September
WASHINGTON (AP) - A measure of U.S. home prices rose only slightly in September from August, a sign that prices are leveling off after big gains earlier this year.
Real estate provider CoreLogic said Tuesday that home prices increased 0.2 percent in September from the previous month. That's sharply lower than the 0.9 percent month-over-month gain in August and well below the 1.8 percent increase in July.
Prices still rose 12 percent in September compared with a year ago.
Higher mortgage rates and steady price increases began to slow home sales in September. As a result, price gains have cooled off.
Mortgage rates are still very low. And the average rate on a 30-year fixed loan has fallen to 4.1 percent in the past month, down from a two-year high of nearly 4.6 percent over the summer.
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Cargill to label meat after "pink slime' uproar
NEW YORK (AP) - Cargill Inc. says it will start labeling beef products that contain finely textured beef, an ingredient that came under attack as "pink slime."
The meat company says the new packages will appear before next year's grilling season and is in response to consumer demand. It says packages will note when a product "Contains Finely Textured Beef."
Finely textured beef is made of fatty bits of meat left over from other cuts that are treated to kill bacteria. The filler had been used for decades in the U.S. but started to gain negative attention after a New York Times article in 2009, in which a federal microbiologist referred to it as "pink slime."
Cargill says it has been making finely textured beef since 1993.
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Stock market
The Dow Jones Industrial average lost 20.90 points, or 0.1 percent, to close at 15,618.22 points. The Standard & Poor's 500 index fell 4.96 points, or 0.3 percent, to close at 1,762.97. The Nasdaq composite edged up 3.27 points, or less than 0.1 percent, to 3,939.86.
Benchmark U.S. crude for December delivery fell $1.25, or 1.3 percent, to $93.37 per barrel in midday trading in New York. Brent crude, which is used to price international oil used by many U.S. refiners, fell 90 cents to close at $105.33.
In other energy futures trading on Nymex, Wholesale gasoline was down 1.2 cents to close at $2.516 a gallon. Heating oil was down 1 cent to close at $2.864 a gallon. Natural gas rose 2.1 cents to $3.466 per 1,000 cubic feet.